Mahindra Finance CFO, CFO News, ETCFO

In a conversation with NBFC Mahindra & Mahindra Financial Services, Chief Financial Officer, Vivek Karve, immerse himself in a comprehensive discussion of the company’s growth plans to double the balance sheet in three years. Mahindra Finance’s net profit in Q4 FY22 increased to Rs 601 crore from Rs 150 crore in Q4 FY21. The company said in a statement that National Finance Bank maintains liquidity reserves of around Rs 8,000 crore which covers funding requirements for a period of time. Three months.

Meanwhile, the Reserve Bank of India (RBI) has issued a directive that NBFCs can offer credit cards if they obtain regulatory authorization and have a certificate of registration. When asked about this by Karve, he replied that Mahindra Finance will explore this possibility. But it is a very nascent idea before a concrete plan is made. And while other NBFCs are considering the same, if the company goes ahead with the plan, it will be the first NBFC to do so.

In the following edited excerpts, ETCFO explores the company’s growth plan, and how inflation affects demand.

Q: The company’s goal for the next three years is to double the balance sheet. What is the growth plan for that?

Vivek Karf:
Doubling the balance sheet in the next three years is an ambitious, ambitious plan. This means that we need to be at least at a high teen growth rate in each of the three years, and this is also the driving intent of Mahindra Finance.

How are you going to do that? As for our business, today, more than 95% of business comes from vehicle financing, and we also have three to four new hubs, in the form of digital finance business, car rental business, and SME lending business.

The core of vehicle financing will continue to grow if we are to realize this dream or ambition. Despite our silence regarding Commercial Vehicles (CV), we have now renewed plans in the Heavy Commercial Vehicle segment such as Heavy Commercial Vehicles as well as Small and Medium Commercial Vehicles.

We will not play with operators of large fleets, but for owners of small fleets, we have prepared our own growth plans.

In the used car business, the economy has opened up and the semiconductor issue has disappeared. Now the availability of used cars will also increase and it provides us with an opportunity to increase our market share. In fact, after HDFC Bank, we are already the second player in the used car space.

Even in the automotive sector, we aim to further enhance our market share in Mahindra vehicles, both for tractors and utility vehicles. And in the auto sector other than Mahindra, we will definitely focus on OEMs such as Maruti, Hyundai and Tata Motors.

Our growth plan is an extensive growth plan. Especially in the automotive sector, we will also focus more on the affluent in rural and semi-urban areas.

In the other hubs, in the digital finance sector, we focus on personal loans as well as consumer durable loans – the customers that have to do their due diligence will happen digital, at the same time the acquisition will be digital and to a large extent the collection will be digital. Of course, it couldn’t be fully digital, so it would be vegetal. So the feet on the street will also help him.

The second axis is lending to small and medium businesses. We will focus on the agricultural and automotive sector. The focus was currently on Mahindra suppliers. But we are slowly branching out from Mahindra and looking at a broader group of clients where we can take advantage of the bill discount space as well as term loan, equipment loan and unsecured loan space. This is a great opportunity that we think we can take advantage of. We have already begun and are seeing the fruits of establishing the Organization to this end.

The third axis for us will be car rental. The current focus is on the CTC automobile segment, which many large companies offer to their employees. But we’re also looking at non-CTC rental spaces both for corporate and retail. Therefore, we believe that the ultra-rich segment along with digital finance, leasing and SMEs should make up about 15% of our total asset base by fiscal year 25, which today is 3-4%.

Q: Do inflationary pressures affect demand? Is this a concern for you?

Vivek Karf:
Inflation has not yet reached an alarming level, given that low levels of inflation have persisted for a long period of time – in the range of 6 to 7%. Therefore, any inflationary cycle will usually affect discretionary spending. However, for us, where the car being financed is a major source of earning for someone who buys the car and then takes out a loan from us, we need to look at it a little differently.

One thing is going to happen for sure, with current inflation rising, especially commodity-led inflation, car prices are set to go up, which means that car companies have already raised prices. This would translate into growth in the auto industry and thus the vehicle finance industry would grow as well.

In fact, the prognosis for the weak core auto industry is double-digit growth for the current year. Against this background, the vehicle finance industry will also grow.

Although the RBI has raised the repo rate, which means that the cost of borrowing will rise for the non-bank financial firms. We will have to pass this cost wisely on to our borrowers. To this extent there can be an effect. But as long as economic growth continues in terms of infrastructure spending, as well as construction activity continues unabated, the demand scenario for the auto industry should remain intact.

Also, to this extent, while the purchase cost as well as the cost of financing for the borrower may rise, the economic prospects remain good. We believe that in the short to medium term at least, the growth trend of the vehicle finance segment, which we have seen in the last six to nine months, should continue.

Q: Raise the interest rate on the charts in fiscal year 23? How and on what basis do you plan for it?

Vivek Karf:
As of now, we will not see any rate hike. Although this discussion is currently ongoing and this is a business as usual discussion. This decision will also depend on several factors such as net interest margin protection, the competitive scenario and our desire to increase market shares.

Additionally, if we are able to increase the stake in our refinancing business pie, which is the pre-owned business, we will fund businesses where interest rates are much higher and also at the weighted average level, and that creates a cushion for us against inflationary pressures.

If you compare prices to March, prices have increased by at least 100 basis points. Where we have benefited from it has been a benign period in the last year and a half where we have been able to borrow at a competitive rate. A large portion of these loans will continue for the greater part of the current public finances on the books.

Q: As a CFO, what are your areas of focus for the 2023-2024 fiscal year?

Vivek Karf:
Sustained profitable growth will be at the top of my agenda, which means that a closer and detailed performance monitoring mechanism will be an area of ​​focus.

Since there have been extensive regulatory changes, another area of ​​focus as the CFO, and something that I am responsible for, is making sure the company meets letter and spirit of what the regulations want to put on the table.

Third, it would be cost management, since we discussed inflation, it means we have to focus on cost as well. Thus cost management will be one of the big focus areas of the finance team as a whole.

Our fourth area of ​​focus is talent management and team motivation. As the economy opens up, there will be more job opportunities for good talent, so retaining and nurturing the best talent will be our focus.

And finally, effective communication with investors. In any company, investor relations act as a window between the outside world and the home inside, thus communicating and translating what we are doing in the outside world and the expectations of our stakeholders and the business community internally will be one of the areas of focus. So let’s start talking.

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